Morgan Stanley said in its note on Wednesday that a series of external and internal shocks had forced it to downgrade a more upbeat macro-economic forecast at the beginning of this year. Foremost of these was oversupply in bulk commodities such as iron ore, which has driven down the price of Australias biggest export to near five-year lows, along with further signs that China would have to accelerate its own economic rebalancing act away from property and exports. The bank also singled out the federal governments alarmist narrative about a budget emergency, which had dissuaded discretionary consumer spending and private sector capital expenditure. It also accused the government of lacking focus in its infrastructure agenda. On the property boom, it noted that the housing recovery has come through even more quickly than we forecast, pulling some growth into 2014 at the expense of 2015. It urged a delicate mix of jawboning and macro-prudential policies to cool prices and speculative investment. Morgan Stanley said all this puts an already weak labour market at greater risk. Job-shedding from the resources sector and a spluttering East Coast recovery would drive the jobless rate from 6.2 per cent now to 6.8 per cent, it said. The bank has pushed out its forecast for the first Reserve Bank of Australia rate hike to 2016, against a majority bet on the second half of 2015. The last Australian recession was back in 1991, Morgan Stanley said. Avoiding one at this juncture requires a change in policy settings to a more stimulatory stance. Read more: smh.au/business/australia-needs-stimulus-policies-to-avoid-recession-morgan-stanley-says-20141105-11h8e7.html?utm_source=social&utm_medium=facebook&utm_campaign=nc&eid=socialn%3Afac-13omn1676-edtrl-other%3Annn-17%2F02%2F2014-edtrs_socialshare-all-nnn-nnn-vars-o
Posted on: Wed, 05 Nov 2014 09:06:39 +0000
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